Half a million workers needed, building group claims, despite housing slowdown
Zachary Halaschak
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The construction industry will need to add more than 500,000 workers this year to keep up with demand, the Associated Builders and Contractors said on Thursday.
The trade group, which represents the non-union construction industry, used a proprietary model that examines the relationship between payroll construction employment and construction spending growth to determine the number. The assertion is notable because new construction has slowed in recent months as the housing market cools.
“The construction industry must recruit hundreds of thousands of qualified, skilled construction professionals each year to build the places where we live, work, play, worship, learn, and heal,” said ABC CEO and President Michael Bellaman. “As the demand for construction services remains high, filling these roles with skilled craft professionals is vital to America’s economy and infrastructure rebuilding initiatives.”
Construction workers were in high demand this past year. The industry unemployment rate was 4.6% in 2022, near a record level and second only to the 4.5% unemployment rate notched in 2019, ABC said.
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Nevertheless, the housing market, and in turn construction, has slowed as the Federal Reserve continues to raise the country’s interest rates by a historic degree. Rising interest rates have an immediate effect on mortgage rates, sending them upward.
When mortgages become more expensive, demand for homes falls, and thus there is less demand for new construction.
As of Wednesday, the average rate on a 30-year fixed-rate mortgage was 6.12%, down from its peak of over 7% in October and into November, according to Freddie Mac, but way up from about 3.6% a year ago.
While new home sales unexpectedly popped in December, they are well below what they were during 2021’s hot housing market. December’s new home sales were 26.6% lower than in December 2021, according to the Census Bureau.
Sales of existing homes fell 1.5% in December, a sixth straight month of declines, according to the National Association of Realtors. Existing home sales are down a massive 34% from a year ago.
Housing starts measure the annualized shift in the number of residential buildings that are under construction. For the 12 months ending in December, they declined by 21.8% to a 1.38 million annualized rate.
But despite the tumbling demand, construction work has remained buoyant. The industry continued to stay above water and added 25,000 jobs in January, according to the most recent employment report from the Bureau of Labor Statistics.
One reason for the phenomenon is that the housing market went from red-hot to cold so quickly that there is a glut of homes under construction. As those construction projects finally start to come to an end (and as fewer new projects are begun), those jobs will start to dissipate.
The ABC said that while housing is cooling, construction work is needed in other areas of the economy, helping to prop up demand for workers.
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“First, while single-family home building activity has moderated, many contractors continue to experience substantial demand from a growing number of mega-projects associated with chip manufacturing plants, clean energy facilities and infrastructure. Second, too few younger workers are entering the skilled trades, meaning this is not only a construction labor shortage but also a skills shortage,” said ABC chief economist Anirban Basu.
While many economists are forecasting at least a mild recession, the odds of the United States avoiding one has ticked up in recent weeks, owing to a labor market that has remained much tighter than expected. A recession would undoubtedly dampen the construction industry, but by how much and how long would depend on the severity of the downturn.